A new report claims a majority of those laid off due to the coronavirus are making more via unemployment than they did when working.
At the University of Chicago, economists Joseph Vavra, Peter Ganong, and Pascal Noel believe most recent additions to America’s unemployment roll are raking in the dough compared to when they were having to get out of bed — roughly two-thirds, in fact.
A big reason: a substantial beef-up of unemployment insurance via the coronavirus economic stimulus.
As noted by The Daily Wire, the federal government’s $2 trillion CARES relief package greenlit an additional $600 per week in unemployment insurance for those sidelined by COVID-19-related closures.
The $600 figure was chosen because it would raise the average payment from last year — roughly $370 weekly — to the average lost 2020 salary (approximately $970).
However, the average from 2019 is far higher than the median for this year.
Some recipients will even get double their usual dough.
Courtesy of the report:
“We find that 68% of unemployed workers who are eligible for UI will receive benefits which exceed lost earnings. The median replacement rate is 134%, and one out of five eligible unemployed workers will receive benefits at least twice as large as their lost earnings.”
An increase for some of America’s unemployed isn’t a shock, but the U of C’s finding is still a stunner.
Michael Strain, of think tank American Enterprise Institute, expressed his surprise to outlet FiveThirtyEight:
“I think we all knew that some workers were going to be getting more than their original earnings. I would not have guessed that it was quite this many workers, but I certainly think that it’s a completely plausible figure.”
So why work when you can coast on a check from Uncle Sam?
Well, as observed in the report, it isn’t so rosy as it may at first appear:
“It is important to note that the unemployed also lose health insurance and other non-wage compensation, and that there are public health benefits of staying home during a pandemic. High replacement rates can also encourage UI take-up and result in positive pecuniary externalities from greater spending.”
Still, it’s no surprise some employers are frustrated by the prospect of roping people back to the grind for less pay than they were getting watching Looney Tunes.
For small businesses, it’s even more of a problem.
From TDW:
Small businesses that applied for emergency federal loans to keep them afloat during forced shutdowns now face the question of whether they can pay back that loan if they cannot entice employees back to work, a condition of loan forgiveness in the aid program.
I’m perpetually amazed by the scope of this pandemic. Virtually every aspect of society has been affected, and in some ways, we may never see a return to how things were. We’re all living in a historic time. We’ll always remember those few months in 2020 that split time in half.
At least, I hope “few months” is all we’ll reference on the other side of the monstrosity. But places like California and Michigan are keeping a heavy foot upon peoples’ ability to return to normal, and Dr. Fauci has pointed to a possible viral surge in the fall.
We’re certainly not out of the woods yet. But, I guess, while we’re in, enjoy your raise.
But not too much — we’ve got to get on over to a store called America, and flip that Closed sign back to Open again.
-ALEX
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